Google+ FANNY LEE & THE TEAM :Own Homes. Grow Wealth. Pass It On.: "How vital real estate has become to Canada's economy!"

Wednesday, May 3, 2017

"How vital real estate has become to Canada's economy!"

At 21:16, while we were driving home from a Etobicoke function, we received the a message from our Calgary cousins.  It was an article on the Financial Post of Calgary Herald titled: "Oil prices slump makes real estate Canada's crutch" with picture of of "SOLD" signs (at Victoria Square, Markham).

Yes, "how vital real estate has become to Canada's economy!"

We were debating if it was just a creative birthday prank from our fun-loving cousins.  After some intensive online searching, we verified that it was actually printed.  Here is the the Financial Post page thumbnail
The picture featuring 2 of our SOLD signs is attached below.  It was a totally unexpected birthday surprise, for sure!

今晚九時許,參加過小兒在 Etobicoke 的一個宴會後開車回家途中,在卡加里的堂弟 whatsapp 當地報紙經濟版中刊登有關地產對加拿大經濟的重要, 而採用的照片是攝於 萬錦大教堂鎮我們同時售出的2個物業前。



( Calgary Herald - B2 Financial Post: May 2, 2017 )

Oil prices slump makes real estate Canada’s crutch
Some worry overreliance on housing can make economy vulnerable in slowdown
Calgary Herald 2 May 2017

Two things happened last week that were a reminder of just how vital real estate has become to Canada’s economy.
On Friday, Statistics Canada released gross domestic product data that showed February was a banner month for sectors linked to housing. The real estate industry, residential construction, financial and legal services generated a combined 0.5 per cent increase in output, the biggest one-month gain since 2014. Without those, the overall economy would have contracted slightly in February.
A day earlier, Ontario released a budget that projects land transfer taxes will surpass $3 billion in the current fiscal year, from $1.8 billion three years ago. For the province, it’s the difference between a balanced budget and a deficit.
Measures of housing’s contribution to the economy are imprecise, but estimates largely put the direct contribution in excess of 20 per cent. It’s much more than that once you add all the indirect effects, with benefits spread widely from lawyer fees to government revenue and increased retail purchases through so-called wealth effects as rising home equity values prompt households to ramp up consumption. The big worry is that Canada has moved from a reliance on oil to a reliance on real estate.
The influence of housing on the economy is so pervasive that it won’t take much of a slowdown to act as a major drag on the economy, said Mark Chandler, head of fixedincome research at RBC Capital Markets.
“You don’t need a collapse in house prices, you don’t need housing starts to be cut in half for weaker real estate sector to have a significant effect on GDP and incomes,” Chandler said. RBC’s ballpark estimate is that a 10-percent decline in national home prices would knock a full percentage point off growth.
A Toronto Dominion Bank report from 2015 found the housing wealth effect has been responsible for about one-fifth of all growth in consumption since 2001. “A lot of the strength we have seen in consumption is housing related,” said Brian DePratto, the economist who wrote the 2015 report. If you strip out the direct and indirect impact from housing on the economy, “you are talking about a much lower trend pace of growth.”
It’s hard to believe, but there was a time not long ago when Canada’s banks lent more to businesses than homeowners. It was the norm in fact until the early 1990s, when mortgage loans surpassed business lending for the first time. Residential mortgages today make up about 52 per cent of all chartered bank loans, versus 21 per cent for business lending.
Still, that portion of business lending is up from a record low of 19 per cent in 2012, suggesting that as home valuations become stretched and as mortgage and capital regulations tighten, banks are increasingly looking to companies for lending growth.
A closer look, however, reveals that much of the new business lending is in fact real estate-related. Bank of Canada figures show 14 per cent of all private business loans from chartered banks are now bound for so-called real estate operator industries, the biggest share in the history of data back to 1981.
The $27.4 billion in private loans to the sector, which represents companies that own and manage real estate assets, exceeds the combined lending to the manufacturing and oil and gas sectors. That’s on top of the $15 billion loaned to developers, more than double levels in 2010.

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